Beckjord v. Traeger

California Court of Appeal Dec 28, 1934 No. Civ. 8779Published

Before: Stephens

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Holding. The court held that the chattel mortgage was valid and enforceable against the Slushers because they had notice of the mortgage, were estopped from challenging it, and the bulk sales law did not apply to a business that was not yet a going concern. Furthermore, the court found the good faith affidavit substantially complied with statutory requirements despite minor technical defects.

Issues

Whether a chattel mortgage is void under Civil Code section 3440 when the business was not a going concern at the time of execution.
Whether a chattel mortgage is void under Civil Code section 2957 due to technical defects in the good faith affidavit.
Whether creditors with notice of a mortgage and who consented to its execution are estopped from challenging its validity.

Disposition. affirmed

Quotations verified verbatim against the opinion

“Both of these sections of the Civil Code are for the protection of creditors not in privity with the parties to an obligation and the findings of fact remove the Slushers from that category.”

“It is our opinion that section 3440 of the Civil Code does not apply for the reason that the venture had not become a going one- when the chattel mortgage was given.”

“In addition to the facts that the mortgage given to Beckjord by the Chamberlains was known to the Slushers and was given with their approval, we think the good faith affidavit substantially complies with the statute.”

STEPHENS, P. J.

A judgment was rendered in the superior court against defendants, all of whom other than defendant Traeger, as sheriff, appeal.

The findings of fact supported, as we think, by the evidence, may be abbreviated as follows: The plaintiff Beckjord, respondent herein, owned an open market premises and was a party to a lease of the same and a party to a chattel mortgage upon fixtures therein; Ben H. and Chauncey W. Chamberlain were the lessees and mortgagors in possession. The lease and the mortgage were combined in one instrument. Prior to the date of the lease Beck j or d had entered into an agreement regarding a lease of the same premises to Silas F. and Margaret F. Slusher. The Slushers had the right to assign their interests to any lessee who would be satisfactory to Beckjord and accordingly they produced the Chamberlains as assignees and represented that Ben H. Chamberlain was financially able to pay the aggregate rental for the whole leasehold term and that they, the Slushers, intended to turn over the fixtures then in the premises to the Chamberlains and that they would back the Chamberlains in altering, improving and equipping the market. The Slushers with full knowledge of the transaction permitted it to proceed and they consented to the giving of the chattel mortgage on all fixtures, etc., as security for rental and performance of the lease.

Upon such representations the lease and mortgage with the Chamherlains was entered into. Immediately prior to and during the time the negotiations by which the Chamberlains became lessees, and up to such time, no business was

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being done on the premises and no sales stock of any kind was on hand. The Chamberlains defaulted in some of the required payments on the lease and they were also behind in obligations to the Slushers for money loaned them in connection with the market transaction. The Slushers brought suit against the Chamberlains on two promissory notes and had the sheriff attach the fixtures, etc., mortgaged to Beckjord. The sheriff was informed of this chattel mortgage and in order that the sheriff should retain possession, the Slushers and a surety executed an indemnity bond to the sheriff. Later the fixtures were sold to defendant S. F. Slusher and he removed them from the premises and converted them to his own use. Beckjord brought an action for damages and recovered.

Beckjord v. Traeger

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STEPHENS, P. J.

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